As Vietnam is currently planning to open Special Economic Zones in the country, we believe that it would be important to describe what they are and, more specifically, what they are for.
A Special Economic Zone (SEZ) is a name used to describe an area where businesses are encouraged through various fiscal and legal advantages. The establishment of a SEZ in a country represents one of the most widely used methods to attract foreign direct investments, indeed they have already been opened with success in various other countries including China, Singapore, United Arab Emirates, etc.
Vietnam plans to open three SEZs, one in the North, one in the Centre and one in the South of the country, in particular in the provinces of Quang Ninh, Khan Hoa and Kien Giang. To realize the purpose of opening these SEZs, a bill concerning them drafted by the Government should be approved shortly.
Through the creation of SEZs and the implementation of their business environment, Vietnam could overcome the prudence shown by foreign investors in carrying out businesses there in the past. To ensure the success of these SEZs, Vietnamese professionals have studied the models of SEZs established all over the world, in an attempt to emulate the most functional aspects and to learn from disastrous choices previously made.
Generally speaking, a simplification of administrative procedures in these SEZs will be provided, especially pertaining to that of a company’s incorporation, the reduction of limitations on investment as well as business and fiscal incentives.
In taking a more in depth glance, the approval of SEZs will provide investors the following legal and fiscal advantages:
- Individuals will enjoy an exemption from personal income taxes for five years, but not beyond 2030;
- Individuals will receive a discount of 50% on personal income taxation for a few years later than the exemption;
- Investments that satisfy specific requirements will enjoy a tax exemption for two years and a reduction of 50% for a further four more years;
- The land use term will last for 70 or 99 years depending on the investments sector;
- Investors in Kien Giang province will be facilitated in obtaining a permanent residence card.
Vietnam wants to attract foreign direct investments in particular in the Phu Quoc region as the government wishes it to become a commercial, service and trade center which adheres to international standards.
In conclusion, the willingness to open the aforementioned SEZs confirms the fact that Vietnam wants to attract foreign investors and that, through these SEZs, it could be the right place where foreigners can invest.
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